The Daley Note

For the first time in nearly a year, natural gas traders are contending with substantial storage deficits following disruptions from Winter Storm Fern. Prices reflect the increased strain from a tighter market balance.

The Energy Information Administration (EIA) last Thursday reported a 249 Bcf storage withdrawal for the week ending Feb. 6, leaving working gas at 2,214 Bcf. The latest EIA survey increases the storage deficit to the 5-year average from -27 Bcf to -130 Bcf. Compared to a year ago, storage has flipped from a 66 Bcf surplus to a -97 Bcf deficit.

Over the latest two weeks, capacity holders have withdrawn nearly 610 Bcf due to extreme weather from Winter Storm Fern. The EIA reported a 360 Bcf storage withdrawal for the week ending Jan. 30, a new weekly record.

The massive drawdown since late January reflects the toll of spiking heating demand and lost production from wellhead freeze-offs. East Daley Analytics estimates that over 17 Bcf/d of production was lost at the peak of the storm on Jan. 25-26.

The last time the storage deficit to the 5-year average was greater than 100 Bcf was the third week of March 2025. That week measured a -122 Bcf deficit, though markets were loosening at the time as storage narrowed from a -240 Bcf deficit in mid-February ‘25. Henry Hub prices remained rangebound between $3.50 and $5.50/MMBtu over that period, which is a much different scenario than where cash prices settled the last two weeks. Prices peaked at an average of $13.79 the last week of January, as shown in the figure above.

High spot prices are an indication of market tightness – Winter Storm Fern not only shuttered production, but the lost supply coincided with soaring demand. Prices rocketed higher as desperate buyers on the Gulf Coast (and across the US) pushed Henry Hub up more than 300% over a 10-day span.

So what’s next? The market will become more comfortable with deficit conditions so long as production has been restored and winter weather is not excessively cold the rest of the heating season. Our latest survey of pipeline samples shows production returned to normal in most basins during the first week of February.

The effect on gas prices will be a gradual convergence between cash and the March ‘26 Henry Hub prompt contract. With cash prices trading over a dollar higher at the start of last week ($4.37/MMBtu), the March front-month contract will likely have to move up to meet somewhere closer to cash.  At the same time, cash can move down so long as demand remains stable and subdued through the end of the month. With above-normal temperatures in forecasts for the second half of February, that scenario is the likeliest outcome.

See East Daley Analytics’ Macro Supply & Demand Forecast to learn more about the gas market outlook this winter and in 2026. – Jack Weixel.